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Smith & Wesson Soars After Earnings Beat Estimate on Guns

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March 5 (Bloomberg) -- Smith & Wesson Holding Corp., the second-largest publicly traded weapons maker in the U.S., surged the most in 21 months after the company’s fiscal third-quarter profit exceeded analysts’ estimates and it raised its earnings forecast for the full year.

The shares climbed 16 percent to $13.74 at the close in New York, the biggest increase since June 2012. The stock has risen 34 percent over the past year compared with a 22 percent increase in the Standard & Poor’s 500 Index.

Smith & Wesson, based in Springfield, Massachusetts, has benefited from the national gun-control debate, as enthusiasts stocked up ahead of potentially tighter laws. While new regulations have yet to pass and the frenzy has begun to calm down, Smith & Wesson has been relying on new and popular products to stoke demand.

“They’re gaining market share in their newest lines of handguns,” said Brian Ruttenbur, an analyst with CRT Capital Group LLC in Stamford, Connecticut. “That’s validation that they’re making a good product.”

Sales of handguns, which include the company’s popular M&P pistols, grew 30 percent. Total revenue grew 7 percent to $145.9 million, surpassing estimates of $142.9 million.

Earnings per share in the quarter ended Jan. 31, rose 35 percent to 35 cents, the company said in a statement yesterday. That beat the 29 cent average estimate of eight analysts in a Bloomberg survey.

Raised Forecast

The company forecast full-year earnings per share of between $1.39 and $1.42, increasing its previous estimate of between $1.30 and $1.35. The updated view shows Smith & Wesson has more confidence and that it’s still having trouble meeting demand, even in a down market, Ruttenbur said.

Cai von Rumohr, an analyst with Cowen Securities LLC, called the results “impressive,” and raised his rating on the stock to outperform today.

Sturm, Ruger & Co., the largest publicly traded U.S. firearms maker, reported earnings last week that missed analysts’ estimates for the first time in four years. The stock rose 3.1 percent to $65.44 at close in New York.

Smith & Wesson repurchased 1.1 million shares of common stock during the third quarter for $15 million. It has repurchased a total of 12.3 million shares valued at $135 million since December 2012.

The continued buybacks underscore management’s interest in driving shareholder value, said Reed Anderson, an analyst with Northland Securities Inc. in Minneapolis, Minnesota.

“I think it is something that the market is starting to figure out,” said Anderson, who rates the company outperform.

Facebook Inc. today said it’s cracking down on illegal gun sales planned through its social network. The company said it will delete posts showing a willingness to evade the law, such as selling firearms across state lines or emphasizing no background checks.

To contact the reporter on this story: J. Kyle O’Donnell in New York at jodonnell49@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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